Wright Technological College of Antique

SENIOR HIGH SCHOOL

Sibalom Branch
Sibalom, Antique

LEARNER’S MODULE
BUSINESS FINANCE

MS. ELLEN JOY A. PENIERO, LPT

Name of Instructor
Email Address: ellenjoypeniero@gmail.com
Cellphone Number: 09151485658

First
Semester

2021 - 2022
School Year

1
 Wright Technological College of Antique
SENIOR HIGH SCHOOL
Sibalom Branch
Sibalom, Antique

WEEK 1-2
CONTENT: Introduction to Financial Management

Most Essential Learning Competencies:

The learner should be able to:
1. Explain the major role of financial management and the different individuals involved.
2. Distinguish a financial institution from financial instrument and financial market.

Introduction
Finance is usually related to money. This is partly true since the finance manager or finance
officer is often considered as the fund custodian.
By definition, finance is both a science and an art of correct application of economic and
accounting concepts and principles that define the system, structure and process of management,
allocation, and utilization of financial resources, investments and expenditures.

Areas of Finance

Finance

Private Finance Public Finance

Personal Finance Business Finance

Financial Management Capital Market Financial Investments

Private finance is the management of financial resources of private individuals, non-

governmental organizations and private organization in accordance with prescribed financial policy
and priority of the person or business organizations.

Public finance is the allocation of government income generated from either taxation or
borrowings and the government expenditure based on the approved national and local appropriation
or budget. Public finance is also termed as fiscal administration.

Personal finance is a sub-category of private finance which is desired towards the

management of personal resources of an individual. The income of an individual is sourced from
compensation, exercise of profession, or business income as a sole proprietor.

Business finance is an area of finance that focuses on the handling and management of
financial resources of a business organization. The three major divisions of business finance are
financial management, capital market and financial investment.

Financial management focuses on capital budgeting decision or investment decision on the

acquisition of assets and its corresponding financing scheme.

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 Capital market is an area of business finance that studies different financial institutions and
their functions that provide assistance to both private and public borrowers of funds.it also includes
the study of the cost of borrowing the funds such as interest and other financing charges.

Financial investment includes business decisions about the value and price of stocks and
bonds, portfolio analysis, market analysis, security analysis and behavior of the investors.

Functions of a finance officer

Financial Decisions of a Chief

Finance Officer

Operating Decisions Financing Dexisions

* Credit and collection
* level of inventory
* granting of discounts
* budgeting
* payment and control of
operating expenditure
* dailyoperating decisons
Investing Decisions * equity financing
* non-current asset acquistition * debt financing
* investment portfolio * cost ofcapitaland
* pricing decisions of stocks and borrowing
bonds
* short-term and long-
* discounted cashflow analysis in term borrowing
capital budgeting
* interest ratees

Financial System
It is principally responsible for the flow of money or funds from lender to borrower. It
controls, regulates, and facilitates the saving, borrowing, lending and investing activities happening
among the different players in the system.
There is no standard structure of a financial system that operates in the world. It varies
among countries and among business organizations. The type of government and the economic
system also influence the structure of the financial system of a country.
In the Philippine financial system, the government plays an active role in the flow of money
in the economy through the Bangko Sentral ng Pilipinas (BSP). The BSP regulates the operating
activities of financial institutions and financial intermediaries.
The basic elements of a financial system are as follows: a. financial institutions, b. financial
markets, c. financial instruments and d. Lenders and borrowers.

Financial Institutions
These are institutions or organizations that provide financial services among others, in the
form of loan, credit, fund administration, financing depository and safekeeping. It does not simply
refer to banks. It is a broad term that encompasses all organizations that provide the aforementioned
financial services.
Generally classified as follows: a. depository institutions, b. Financial intermediaries and
c. investment institutions

Depository institutions are financial institutions that accept deposits (savings, current and time
deposits) from individuals and corporate entities, extend loans to borrowers, transfer funds and
manage funds for investment purposes.
Types of Depository Institutions
Banks Savings and loan Trust companies Credit Unions

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 association
Institutions authorized Sometimes referred to It is a legal business A financial depository
to operate and as a financing and entity, usually a major institution that is
regulated by BSP to mortgage company, is division of a universal mainly controlled and
accept deposits and a financial institution or commercial bank, operated by its
bills payment, provide that is engaged in the that acts as a fiduciary members for the
loans and facilitate business of agent or trustee on following purposes:
transfer of funds accumulating the behalf of an individual a. extending credit to
domestically or savings of its person or corporate members
abroad. members and entity for the purpose b. offering
Classification: stockholders and of management, competitive interest
a. universal bank using such administration and c. promoting the
b. commercial bank accumulations for final transfer of concept of thrift
c. thrift bank loans or investments property to the d. providing other
d. rural bank in securities of beneficiary. types of financial
productive enterprise. services

Financial intermediaries are a type of financial institution that acts as the middleperson between
two-parties – the investor and borrowers. It includes all types of financial institutions that receive
money from one party and offer it to another a financial aid. They include banks, insurance
companies, brokerage and investment houses, broker-dealer, mutual funds and pension funds. In
strict technical sense, financial intermediaries do not include depository and investment institutions.
Example of Financial Intermediaries
Mutual Funds Pension Funds Insurance Companies
Accumulates money by selling A pension fund is set up by a The proceeds from insurance
shares of stocks or bonds of business for the purpose of policies sold is invested in
publicly-listed corporations to paying the pension high-yielding maturing
individual or corporate requirements of all private- securities from investment
investors. The funds from sector employees who retire houses, usually to companies
proceeds of the sale are pooled from the business organization engaged in commercial real-
together and channeled to the upon reaching their retirement estate.
borrowers. age.

Investment institutions are companies engaged in buying securities of other companies which are
listed in stock exchange for investment purposes only. This means that an investment institution
simply holds on to the securities it acquired from other companies. Financial securities are held up
to the time of their maturity. This financial institution earns income from holding the securities in
the form of interest or dividends. Mutual funds and insurance companies likewise pool their
financial resources together to form an investment company for investment purposes only.

Financial Markets
It refers to the place where the selling-buying activity occurs to trade equity securities such as
bonds and stocks, currencies, derivative securities, notes and mortgages. The selling-buying
transaction happening in the financial market is called trading activity. The kinds of financial
transactions and financial securities traded determine the types of financial market.
Types of Financial Market
Capital market Money market Primary market Secondary Public market
market
A financial The financial A financial This is where A financial

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 market where market is market where a financial market in which
stocks and bonds classified as corporation can securities are financial
are issued for money market issue new shares traded between securities of
medium and when the of stock. It or among publicly-listed
long-term financial facilitates the investors. There corporation re
periods. Stocks securities being raising of the is no issuance of traded following
are treated as traded have a required amount new shares from a standardized
equities while period of less when the the corporation. contract
bonds are than one year. investors directly It exists after the agreement and
technically This type of buy the new corporation has procedures.
considered as financial security shares from the issued new
debt securities. is called short- issuing shares to the
Investors who term security. corporation. The investors in the
hold stocks Since short-term trading happens primary market.
receive return securities are not between the
from their intended to issuing
investments in beheld for more corporation and
the form of than one-year, the investors or
dividends while they are also investment
those who holds referred as banks.
bonds earn trading securities.
income in the
form of interest.
Example:
Philippine Stock
Exchange:
Manila Stock
Exchange and
Makati Stock
Exchange.

Financial Instruments
A very important element of the financial system wherein the financial institutions and
financial markets carry out their activities through the financial instruments. These refer to contracts
that give rise to the formation of financial assets of one entity and at the same time the creation of a
financial liability or an equity instrument.
In all financial instruments, two parties are involved. One party has a contractual right to
receive the financial assets, and the other party has contractual obligations to pay or deliver the
financial assets.
The most common forms of financial instrument
Cash Check Loan Bond Stock
Either a financial Involves payee Involves lender Represents the A financial
asset or financial and drawer or or creditor and contractual debt security that
liability issuer. borrower or the of the party signifies
debtor. issuing the bond ownership of the
by providing a assets of the
certificate called corporation. Only
bond indenture. stock
The holder of the corporations are
bond, earns authorized by the
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 income through SEC (Securities
interest. and Exchange
Commission).
Shareholders are
given stock
certificate and
has claim on net
assets of the
corporation

Types of Bonds
a. Term Bond – a bond that has a single maturity date
b. Serial Bond – a kind of bond that has a series of several maturity dates instead of a single
maturity date
c. Secured Bond – a type of bond that is secured by the issuing company in a form of real estate as
collateral
d. Debenture Bond – a bond that is not supported by any collateral or security as assurance in times
of non-payment or default, usually given by companies with high credit ratings
e. Convertible Bond – a bond that can be converted into a share of stock in a later date and must be
vested by the bondholder instead of the issuing company
f. Callable Bond – the bond is callable when the issuing company has the option to redeem the bond
prior its maturity date

Types of Stocks
a. Common stock (ordinary share) - is a financial instrument whose holders do not have
preferences over each other
b. Preferred stock (preference shares) – the preferences are in terms of distribution of earnings or
dividend distribution and net assets at the time of liquidation

Self-Check: Identification. Write your answer on the space provided.

_______________1. An area of finance which functions in allocation of government income
generated from either taxation or borrowings and the government expenditure based on the
approved national and local appropriation or budget.
_______________2. A division in business finance which focuses on capital budgeting decision or
investment decision on the acquisition of assets and its corresponding financing scheme.
_______________3. A financial decision of a finance officer which involves short-term and long-
term borrowing.
_______________4. A government agency which regulates the operating activities of financial
institutions and financial intermediaries.
_______________5. A type of depository institution that is engaged in the business of accumulating
the savings of its members and stockholders and using such accumulations for loans or investments
_______________6. In strict technical sense, this financial institution do not include depository and
investment institutions.
_______________7. The selling-buying transaction happening in the financial market.
_______________8. A financial market in which financial securities of publicly-listed corporation
re traded following a standardized contract agreement and procedures.
_______________9. A financial instrument which involves payee and drawer or issuer.
_______________10. A type of bond that is secured by the issuing company in a form of real estate
as collateral
_______________11. A type of bond which when the issuing company has the option to redeem the
bond prior its maturity date

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______________12. A government agency which authorizes stock corporations.
______________13. An example of capital market where stocks are traded.
______________14. A type of stock which have preferences are in terms of distribution of earnings
or dividend distribution and net assets at the time of liquidation
______________15. A bond that has a single maturity date.

Performance Task:

A. Research existing financial institutions in the Philippines for each type of financial
intermediaries. Give 3 examples each.
Mutual Funds Pension Funds Insurance Companies
1. 1. 1.
2. 2. 2.
3. 3. 3.

Source: Aduana, Nick L.. “Business Finance in the Philippine Setting for Senior Highschool” 2017

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 Wright Technological College of Antique
SENIOR HIGH SCHOOL
Sibalom Branch
Sibalom, Antique

Name: ______________________________________ Section: ________ Date: ___________

BUSINESS FINANCE- WEEK 1-2

SELF-CHECK

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

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 Wright Technological College of Antique
SENIOR HIGH SCHOOL
Sibalom Branch
Sibalom, Antique

Name: ______________________________________ Section: ________ Date: ___________

BUSINESS FINANCE- WEEK 1-2

PERFORMANCE TASK

A.

Mutual Funds Pension Funds Insurance Companies

1. 1. 1.

2. 2. 2.

3. 3. 3.